Arnold Kling  

Taxing OPEC

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Andrew Samwick points to a paper by Jayanta Sen that suggests that it is in the interest of oil consuming nations to tax oil. Sen writes,


a tax on crude would transfer wealth of $100+ billion a year from foreign governments to the US consumers, thus providing a major economic stimulus to the economy while at the same time reducing consumption of gas...For a range of demand and supply elasticities that I study, the wealth transfer savings for the United States (which has about one-third of global oil imports) should be in the range of $108 to $152 billion a year.

At the Saffran Conference, Jeff Frankel rattled off seven advantages of a tax on oil--I don't remember all of them, but they are bound to include reducing pollution, reducing trade imbalances, encouraging search for alternative energy, and more.

But that is an example of a policy advocated by economists that is a political non-starter.


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TrackBack URL: http://econlog.econlib.org/mt/mt-tb.cgi/394
The author at Tim Worstall in a related article titled Solving the Oil Problem. writes:
    Wanna know how to solve the oil problem?Tax it. But then, as the man says: But that is an example of a policy advocated by economists that is a political non-starter. I’d just add that it’s a blindingly obvious and [Tracked on November 8, 2005 8:35 AM]
COMMENTS (2 to date)
dearieme writes:

Would it be a non-starter if the trade-off was a cut in worker payments into the Social Security system? How would the arithmetic look: how big a tax on oil or gas would be needed to exempt every American from paying into Social Security? Could you even call the tax a "Social Security tax"?

Mark T writes:

Far better, introduce an import tax so that it never falls below $60. This provides a minimum for consumers - encouraging efficiency etc, but also a minimum for producers, encouraging alternative energy, development of oil tar and shale (significant geo-political benefit) and takes government out of the redistribution issues. Setting it at curret levels would be politically acceptable sice it is taking away a possible windfall, not increasing hurt from here. Windfall profits to oil companies could be recovered through corp tax offsettable for expenditure on refineries and oil tar etc

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